20201223Reply Comments.pdf

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LISA D. NORDSTROM
Lead Counse!
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Decembet 23,2020
VIA ENCRYPTED ELECTRONIC IiAIL
Jan Noriyuki, Secretary
ldaho Public Utilities Commission
11331 W. Chinden Blvd., Bldg 8,
Suite 201-A(837141
PO Box 83720
Boise, ldaho 83720-0074
Re Case No. IPC-E-20-32
Rate Decrease for costsAssociated with the Boardman power plant
Dear Ms. Noriyuki:
Enclosed forelectronicfiling, pursuantto Order No. 34602, pleasefind ldaho power
Company's Reply Comments.
lf you have any questions about the attached document, please do not hesitate to
contact me.
Very truly yours,
X* !.7/"1't".*,
Lisa D. Nordstrom
LDN:slb
Enclosure(s)
LISA D. NORDSTROM (lSB No. 5733)
ldaho Power Company
1221 West ldaho Street (83702)
P.O. Box 70
Bofse, ldaho 83707
Telephone: [phone]
Facsimile: [phone]
Inordstrom@ida hopower. com
Attorney for ldaho Power Company
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
!N THE MATTER OF IDAHO PO\A'ER
COMPANY'S APPLICATION FOR
AUTHORITY TO DECREASE ITS RATES
FOR ELECTRIC SERVICE FOR COSTS
ASSOCIATED WITH THE BOARDMAN
POWER PLANT,
CASE NO. |PC-E-20-32
IDAHO POWER COMPANY'S
REPLY COMMENTS
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ldaho Power Company ("ldaho Power" or "Company") respectfully submits the
following Reply Comments pursuant to Order No. 34838 in response to Comments filed
by the ldaho Public Utilities Commission ("Commission") Staff on December 10,2020.
ldaho Power welcomes Staff's Comments, particularly in support of the prudence of all
Boardman power plant ("Boardman') investments made through June 30, 2020, and
approval of the Company's proposed decrease in customer rates effective January 1,
2021. Wth regard to Staffs concerns surrounding the Company's processes, ldaho
Power believes it prudently manages its capita! investments over time, but welcomes
Staffs proposalto engage in furtherdiscussions to help facilitate future prudence reviews.
IDAHO POWER COMPANY'S REPLY COMMENTS - 1
I. BACKGROUND
Boardman is a pulverized-coal plant located in north-central Oregon. lt went into
service in 1980 and consists of a single generating unit. ldaho Power owns a 10 percent
interest, or 58.5 megawatts (net dependable capacity), in Boardman while Poriland
General Electric ("PGE") has a 90 percent ownership. As the majority partner of the plant,
PGE operates the Boardman facility. ln February 2012, the Commission issued Order
No. 32457 authorizing the Company to establish a balancing account to track the
incremental costs and benefits associated with the early shutdown of Boardman. On May
17 ,2012, the Commission issued Order No. 32549, allowing the Company to replace the
then current non-levelized base rate revenue recovery associated with ldaho power's
existing investment in Boardman with a levelized revenue requirement that is tracked in
the Boardman balancing account.
Cessations of coal-fired operations at Boardman, which was approved by federal
and state regulators in 2010 and 2011, occurred in October,2O2O. ln its Application filed
on August 21 ,2A20,ldaho Power requested an order (1) finding that all actual Boardman
investments through June 30, 2020, were prudently incurred, and (2) decreasing
customer rates $3.90 million to reflect full depreciation of all Boardman investments
effective January 1,2021, equating to an overall decrease of 0.33 percent.
II. IDAHO POWER'S REPLY
Based on its extensive audit and review, Staff recommends the Commission (1)
approve the Company's request to decrease customer rates of $3.90 million effective
January 1, 2021, to reflect full depreciation of all Boardman investments, (2) find that all
actual Boardman investments made through June 30, 2020, are prudently incurred, and
IDAHO POWER COMPANY'S REPLY COMMENTS - 2
(3) require ldaho Power to provide a proposal within g0 days to address the Company,s
approach and method for documenting and supporting any future prudency review filings
for capital investment with its joint-venture projects.r ldaho Power acknowledges and
appreciates Staffs extensive review of the capital investment documentation, finding the
investments made at Boardman during the June 1, 2012, through June 30, 2020, time
period were prudent and concluding that the proposed rate decrease of $3.g0 million
should be approved. The remainder of these Reply Comments will respond to Staffs
third recommendation regarding appropriate methods of documentation and support for
future prudence requests. The Company reiterates its role in decision-making at the plant
and the adequate oversight ldaho Power provides on project expenses but looks forward
to working with Staff to address the documentation supporting approval of future joint-
venture project investments included as part of the Company's request in future prudence
filings
A.The Company has Provided Appropriate Oversight of Capital lnvestmentDecisions at Boardman.
As a 10 percent owner in the plant, Idaho Power is actively involved in the decision-
making process related to capital investments at Boardman, regularly participating in
discussions of the capital investment forecast prepared by pGE, influencing the
investments ultimately made. The vatidation of Boardman costs begins during the Asset
Management Plan meetings, when an open dialog between the partners and plant
personnel occurs, leading to refined, cost-effective forecasted spend. lt continues upon
receipt of the project funding justification and cost information for the project, which is
reviewed and approved by the Company within its work order management software.
1 Staff Comments, g.2, 10.
IDAHO POWER COMPANY'S REPLY COMMENTS - 3
Then, on a monthly basis, ldaho Power receives from PGE a Boardman budget
comparison that identifies variances at the Federal Energy Regulatory Commission
account level.
At a more granular level, the Company performs a format review of the capital
expenditures three times a year through a process referred to as the Budget Update.
Specific to expenditures at Boardman, individual projects are reviewed during this
process, including an examination of actual spend compared to budget, as well as a
comparison to the prior Budget Update. ldaho Power used this information to monitor
capital expenditures at the individual project level, to discuss any significant variances
with the plant operator to determine the cause, and to verify that past and ptanned
expenditures were or would be prudenfly incurred.
Staff indicated they were able to perform a review of the Boardman investments to
determine the prudence, but it was not without difficulty.2 Staff believes that ldaho power
lacks a "robust process to clearly document and track expenses to show both the
Company and its partner's steps for approving project expenses,"s citing a number of
items that Staff believes may need improvement based on its review of the Boardman
investment documentation. Staff noted the importance of a robust process when
managing partners are involved, especially as the Company begins to exit coal-fired
operations in units of its other plants. As such, Staff is recommending the Commission
require ldaho Power to provide a proposal within g0 days of the Commission's order to
2 Staff Comments,3 Staff Comments,
IDAHO POWER COMPANY'S REPLY COMMENTS - 4
p. 8.
p. 8.
address the Company's approach and method for documenting and supporting any future
prudence review filings for capital investment with its joint-venture projects.l
Idaho Power acknowledges that a prudence review of investments made at a
jointly-owned power plant spanning several years, such as the one conducted by Staff in
this case, is both a time and data intensive exercise. However, the Company would like
to emphasize and clarifo certain issues raised in Staffs Comments. ln responding to
Staffs production requests, ldaho Power provided voluminouss amounts of
documentation supporting the investments at Boardman, including financial records,
project justification, bidder proposals, construction contracts and scope documents,
project change orders, and PGE indirect and direct charges to the project, reconciling
those amounts to the Company's records. ln total, Staff reviewed 81.4 percent of the total
dollars or 26.4 percent of projectso for investments that spanned an eight-year time period.
Even though the review covered investments made over severalyears with differing plant
managers, Staff noted that in general the steps taken by PGE were consistent with
prudent contracting practices and were used for most major capitalprojects at Boardman.
Staff further noted that for smaller capital projects, the plant often used an onsite
contractor to perform work and believes this likely increased efficiency and potentially
reduced project costs.z
ldaho Power believes the Company has provided sufficient documentation
supporting appropriate oversight of the approval of Boardman project expenses.
4 StaffComments, p. 10.s ldaho Power provided over 500 megabytes of documentation in this case supporting the prudency ofBoardman investments.6 Staffs Comments, p. 6.7 Staffs Comments, p. 8.
IDAHO POWER COMPANY'S REPLY COMMENTS - 5
However, the Company looks forward to working with Staff to address their concems and
supports providing Staff a proposal within g0 days of the Commission's order to address
the Company's approach and method fordocumenting its processes for approving project
expenses associated with capital investments in other joint-venture projects. Once
aligned on the process, these new practices woutd be in place for future investments, or
those investments made in 2A21 and beyond, and included as part of the Company's
request in future prudence filings.
H. CONCLUSTON
ldaho Power appreciates the opportunity to respond to Comments filed in this
case, for Staffs review of the voluminous amount of documentation of Boardman-related
costs, and its support for a prudence determination of the investments and approval of
the Company's proposed decrease in customer rates effective January 1, 2021. The
Company respectfully requests that the Commission issue an order approving its request
for an order (1) finding that all actual Boardman investments through June 30,ZO2A,were
prudently incurred, and (2) decreasing customer rates $3,902,622 to reflect full
depreciation of Boardman investments, effective January 1, 2021, which equates to an
overall decrease of 0.33 percent.
DATED at Boise, ldaho, this 23rd day of December, ZO2O.
n" !.("1-t^-*,
LISA D. NORDSTROM
Attorney for ldaho Power Company
IDAHO POWER COMPANY'S REPLY COMMENTS - 6
CERTIFICATE OF SERVICE
I HEREBY CERTIFY that on the 23d day of December 2O2A ! served a true andcorrect copy of IDAHO POWER COMPANY'S REPLY COMMENTS upon the followingnamed parties by the method indicated below, and addressed to the foilowing:
Commission Staff
John R. Hammond, Jr.
Deputy Attorney General
ldaho Public Utilities Commission
11331 W. Chinden Boulevard
Building 8, Suite 201-A
Boise, ldaho 83714
_ Hand Delivered
_U.S. Mail
_Overnight Mail_FA)(X Email iohn,[e-mail]
Benjamin Otto
ldaho Conservation League
710 N 6th Street
Boise, ldaho 83702
_ Hand Delivered_U.S. Mail
_Overnight Mail
_FA)(X Email [e-mail]
A*)^ddh_
Sandra D. Holmes, LegalAsst.
IDAHO POVVER COMPANY'S REPLY COMMENTS. T